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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 14912 / May 16, 1996
SECURITIES AND EXCHANGE COMMISSION v. MELVIN H. COX, et al.
3:96-CV-0908-X, USDC, ND/TX (Dallas Division)
The Securities and Exchange Commission ("Commission")
announced that on May 3, 1996, an order of permanent injunction
was entered in United States District Court in Dallas, Texas,
against Melvin H. Cox ("Cox") in connection with a $54 million
"Ponzi" scheme involving approximately 3500 investors residing in
34 states and Canada. The Commission's complaint alleged that Cox
promised investors that their monies would be used to trade in
first and second mortgages and would result in a return of 12.8%
(later 13.4%) every 45 days, a compounded return of as much as
160% a year. In fact, according to the complaint, investors'
monies were loaned to 12 corporations, who are relief defendants
in this matter, at interest rates of 6-8% per annum.
Without admitting or denying the allegations in the
Commission's complaint, Cox consented to be enjoined from future
violations of Sections 5 and 17(a) of the Securities Act of 1933,
and Section 10(b) of the Securities Exchange Act of 1934, and
Rule 10b-5 thereunder. The order provides that Cox must submit to
the Court, within 20 days, an accounting for monies he received
in the course of the activities complained of by the Commission.
The order further provides for disgorgement of ill-gotten gains
and a civil money penalty in amounts to be determined by
agreement of the parties, or, in absence of such agreement, to be
set by the Court. In any hearing held to determine the amount of
disgorgement or civil penalties to be paid, the order provides
that Cox may not contest the liability allegations set forth in
the Commission's complaint.
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PERMANENT INJUNCTION ENTERED IN $54 MILLION PONZI SCHEME
The Commission announced that on May 3, 1996, an order of
permanent injunction was entered in United States District
Court in Dallas, Texas, against Melvin H. Cox (Cox) in
connection with a $54 million "Ponzi" scheme involving
approximately 3500 investors residing in 34 states and
Canada. The Commission's complaint alleged that Cox promised
investors that their monies would be used to trade in first
and second mortgages and would result in a return of 12.8%
(later 13.4%) every 45 days, a compounded return of as much
as 160% a year. In fact, according to the complaint,
investors' monies were loaned to 12 corporations, who are
relief defendants in this matter, at interest rates of 6-8%
per annum.
Without admitting or denying the allegations in the
Commission's complaint, Cox consented to be enjoined from
future violations of the securities registration and
antifraud provisions of the federal securities laws. The
order further provides for disgorgement of ill-gotten gains
and a civil money penalty in amounts to be determined by
agreement of the parties, or, in absence of such agreement,
to be set by the Court.[Securities and Exchange Commission
v. Melvin H. Cox, et al., 3:96-CV-0908-X, USDC, ND/TX] (LR-
)
T. CHRISTOPHER BROWNE
Trial Counsel
Fort Worth District Office
817/885-6464